This week, we’ll take a closer look at financial literacy and why it has become a hot topic in many states the last few years. Financial literacy can be described as having a skill set and knowledge base which allows someone understand their financial resources and make informed decisions based off their circumstance and goals. When it comes down to it, being financially literate can mean the difference between constant worry or a level of financial freedom. A large collection of bills related to financial literacy have passed in 2022 alone - but what are states proposing related to financial literacy? Let's dive in!
What is Financial Literacy?
Financial literacy is "the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing."
Being financially literate primarily enables people to know how actions we take impact our overall financial health. It helps us understand how to not only set ourselves up to pay our bills, but how to accomplish life goals (think going to college, saving for a home, or going on a dream vacation). Financial literacy is more than understanding money in and money out - it's how to use debt responsibly, what impacts credit score, and benefits of tracking personal budget.
With the pace at which the world changes, learning how to manage money is a lifelong journey. How we approach this management can change from year to year, depending on the many factors that dictate how we make financial decisions like our job, lifestyle, family situations, or the economy. When looking at the last 100 years of human existence, how we make, spend, save, and invest our money has had a dramatic shift. We have migrated from a primarily cold hard cash society to one where credit, debit, and electronic transfers dominate. This means financial literacy should be an ever evolving skill.
Whether it be jumping into crypto, investing a lot in NFTs without research, or taking on a home loan in a high interest market, having a missing piece of financial knowledge can have consequences that span decades. So where do people get a foundation in financial literacy?
Some people have access to classes in their high schools or college courses. Others are required to take classes when signing up for student loans (see this blog about "Know Before You Owe" legislation) or a home loan. People also can supplement this education by reading books, listening to podcasts, or learning from the friends or respected peers. Nearly half the states in the United States have taken on legislation to mandate financial literacy instruction, so gone are the days of needing to rely on podcasts and Twitter! Let's checkout some of these bills.
Financial Literacy Legislation
States have proposed all sorts of legislation related to financial literacy over the last decade, but we have seen a steep increase in legislation proposed the last couple years. During the 2021-22 legislative sessions, 585 bills were introduced pertaining to "Financial Literacy", 42 states and DC proposed bills addressing financial literacy, with 62 bills passing.
Legislation related to School Instruction
Florida, Nebraska, Georgia, New Hampshire, and Ohio all passed bills focused on adding financial literacy education requirements for graduating high school. The Florida bill in particular is interesting as it lays out what they consider to be the key elements of financial literacy, including balancing a checkbook, money management, how to contest an incorrect bill as well as understanding loans, insurance, taxes, contracts, saving, and investments.
Pennsylvania proposed a bill which creates a required personal finance course for graduation, directing the commonwealth’s Department of Education to provide professional development for current and potential teachers, resource information on economics, economic education and personal finance, and curriculum materials needed for teaching the course. Georgia passed SB 220, the "Civics Renewal Act", which starting with the 2024-25 school year, requires all high school students to take at least a half-credit financial literacy course in order to graduate.
Iowa HF 2263 provides that the personal financial literacy instruction provided in school districts and nonpublic schools in grades nine through 12, beginning with the students in the 2022-2023 graduating class, shall require students to attain a passing score on an assessment of the student’s knowledge of personal financial literacy as a condition of graduation. The bill authorizes a student who fails to attain a passing score on the assessment to retake the assessment as many times as necessary.
New Jersey proposed a bill which directs every local board of education to include financial, economic, business, and entrepreneurial literacy in the curriculum. This legislation does not specify the length of the course or whether it must be a stand-alone course or if it can be integrated into existing courses. This legislation does not have any funding appropriations and would require the local boards of education and local schools to take on the burdens of implementation.
Mississippi SB 2438 enacts the State Financial Literacy Act. This bill requires local school boards of every public school district to adopt a policy to implement a financial literacy education program into its curriculum for students in grades 10 and 11.
Alabama HB259 failed, but would have allowed local boards of education to offer instruction in the life skills of personal finance literacy, personal rights, and good citizenship in grades six to 12 as an elective course or as a component in the health education and physical education state courses of study.
Other Proposed Legislation
Colorado passed three bills related to financial literacy: HB1107, HB1366, and HB1389. HB1107 creates in the Department of Higher Education the Inclusive Higher Education Grant Program to provide grants to state institutions of higher education for the purpose of "establishing, or expanding existing, inclusive higher education programs for students with intellectual and developmental disabilities." It also states that grant awards may be used to provide programs and supports for the students to develop independent living skills, including self-care, socialization, career readiness, healthy lifestyle choices, and financial literacy. HB1366 establishes new programs concerning postsecondary career and education options for students, including updating the financial literacy resource bank to include more information and training concerning postsecondary financial aid. HB1389 establishes the financial literacy and exchange program within the division of housing.
Arizona passed a bill which creates a community treatment program for imprisoned women and their children. The community treatment program shall provide programs and support services to assist mothers and their children in developing the skills necessary to become functioning, self-sufficient families, including:
- Substance abuse treatment
- Well-being and emotional supports
- Parenting skills
- Educational and employment skills
- Financial literacy
- Workforce skills training
Another interesting set of bills is two out of Kentucky and the District of Columbia. Remember in 2021 when the NCAA approved name, image, and likeness (NIL) policy allowing student-athletes to monetize their NIL? Well these two bills address this policy and financial literacy! Kentucky SB 6 requires colleges in the State to set up financial literacy workshops for student-athletes. It also does other things like prohibit name, image, and likeness compensation as an inducement and prohibit institutions, associations, or affiliated organizations from providing compensation for name, image, and likeness of a student athlete and other similar activities. DC B24-0455 encourage colleges with student-athletes to teach financial literacy. This bill also requires an athlete agent notify the school at which the student-athlete plays before contacting the athlete and give the student-athlete a right of legal action against am athlete agent. The agents bill would also expand the definition of “athlete agent”, provide for reciprocal registration of agents licensed in other states, among other things. Illinois HB 1175 amends the Student-Athlete Endorsement Rights Act to add a provision encouraging postsecondary educational institutions to provide financial literacy, brand management, and life skills programming designed for student athletes.
Delaware, Michigan, New Jersey, Pennsylvania, and Rhode Island proclaims the month of April 2022 as “Financial Literacy Month” in these states.
It is really interesting to see all of these bills. Not only does financial literacy help you plan for the future, but it helps you navigate uncertainty, handel emergencies, and give people confidence that they are prepared for what life could throw them.
Cover Photo by micheile dot com on Unsplash
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